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Knoedler Gallery Settles Suit Over Phony Rothko

MANHATTAN (CN) - Just as its former director Ann Freedman prepared to testify, the Knoedler Gallery etched out a confidential deal Wednesday to conclude the federal action lobbed by a power couple to whom it sold a fake Mark Rothko painting.

Knoedler and its former executives have been under intense scrutiny after reports emerged four years ago that dozens of Abstract Expressionist paintings that it sold by such giants as Rothko, Jackson Pollack and Franz Kline were fakes.

Sotheby's chairman Domenico de Sole, who founded Tom Ford International, and his wife, Eleanore, purchased what they had thought was Rothko's "Untitled, 1956," an apparent example of the artist's playful study of pulsating red rectangles on a red canvas.

It turned out to be the handiwork of Queens forger Pei Shen Qian, who convincing imitations of the artistic movement even fooled some of the field's best-known scholars.

The revelations of the forgeries closed the Knoedler's doors in December 2011, roughly 165 years after it first opened, and the de Soles were among the first to take the gallery to court.

Federal prosecutors subsequently brought charges against Qian, Long Island dealer Glafira Rosales and two brothers who acted as his dealers.

While Qian turned fugitive by fleeing to China, Rosales pleaded guilty to an $80 million fraud, and brothers Jose Carlos Bergantinos Diaz and Jesus Angel Bergantinos Diaz remain under indictment.

Knoedler and its staff escaped prosecution, but it has labored since that time to convince the courts and the public that it was ignorant of the works' spurious provenance.

Though the gallery's ex-director Freedman reached a deal Sunday on the charges against her personally, she was still scheduled to testify Tuesday.

Moments before she would have been called to the stand, however, U.S. Judge Paul Gardephe abruptly sent the jury home without explanation.

By Wednesday morning, the remaining parties to the lawsuit had put the squabble to bed on undisclosed terms.

Knoedler's attorney, Charles Schmerler with Norton Rose Fulbright, said in an email that he was "pleased" that the parties reached a resolution.

Schmerler noted that the court previously dismissed claims against his other clients: businessman Michael Hammer and his company 8-31 Holdings, an operator of art galleries.

There is "no evidence that 8-31 Holdings acted improperly in any way at all," Schmerler said in an email.

"The only real remaining issue was the liability of Knoedler Gallery, which has not been in operation for over four years, for the acts allegedly committed by a defendant who already had settled her case with the plaintiffs," he continued.

Emily Reisbaum, who noted that she was "honored' to represent the de Sole family for Clarick Gueron Reisbaum, meanwhile painted a darker portrait of the Knoedler Gallery.

"This settled after weeks of trial evidence showing that, for 15 years, Freedman and Knoedler ignored the most eminent experts, buried unhelpful research, made up stories about where works came from, earned profit margins that virtually announced the fraud, hid the truth, and lied to collectors, like the De Soles, to sell fakes and make millions," Reisbaum said in a statement. "The outcome - including the settlements and the fact that the true story has finally been told - is exactly as we hoped and expected."

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